Excitement was the prevailing feeling at Alibaba’s Gateway 17 conference. The big numbers, learning about the opportunities in China, hearing the success stories and talking to the attendees all contributed to a feeling of exuberance in Detroit last week. Yet after going back to the day-to-day reality of running a business, many are asking: now what? While entering China is exciting, it’s also hard work with many serious considerations and choices to take into account. To assist, China Skinny has three next steps to start to see if China is right for your brand.

Educate Yourself

Learning about China’s middle class and an overview of Chinese consumers’ shopping habits is only the beginning of understanding China. Find out more about Chinese consumers, your specific product category and niches in China, regional differences, trends, routes to market and marketing tactics in China.

China Skinny’s blog is a great way to read more about various topics in China and our newsletter provides a weekly update on what’s going on. What’s hot one day in China, may be in the dumps the next – remember China’s moves fast and constantly learning about China is mandatory.

Take a Deeper Dive

Once you’ve armed yourself with ongoing China knowledge, take a deeper dive with the help of experts to further explore your product category and options.

Find out the size of the prize for your brand, further explore options and platforms for entry which can vary greatly in cost, learn how to get consumers interested in your brand or how to leverage the current awareness that you may have. Professional research by experts such as China Skinny will help you avoid mistakes, focus on the right opportunities and save time and money in the long run.

If you are even thinking about China get in touch with an experienced China law firm. Many brands run into problems for simply failing to protect their IP. China is a first to file county and getting started on IP protection is a must do. Also, start looking for a reputable distributor partner. Due diligence is a must.

Be Open and Ready to Adjust

Take the next steps with an open-minded and flexible strategy. Changes that have taken place over decades in Western markets, can happen in less than 12-months in China. Understand that China can shift suddenly and your brand should be able to keep pace. Invest in trips to China for hands-on learning, but don’t be wowed by the bright lights or tall promises from distributors – it takes a long time to really understand China. Be prepared to constantly learn and adjust while leaving your Western-formed assumptions behind. China is a land of opportunities, but they won’t be realised without many lessons along the way.

Get in touch today with our Shanghai or North American office to talk about your specific needs.

Premiumisation Goes from Strength to Strength

Premiumisation of products and packaging was more evident this year than past years at SIAL China and Craft Beer China. Chinese consumers are maturing quickly and looking to trade up, so brands are providing plenty of options.

Craft Beer China is supporting this trend through their second China trade show, which indicates where craft beer is going in China. One German distributor noted that of the Chinese distributors he works with, several are now trying to compete on quality and differentiation rather than traditionally promoted features – quantity and price. Efforts to differentiate products were seen through the types of beer being imported and their distinction through packaging and bundling. One distributor aimed to give their beer a ‘more luxury feel’ through fancy packaging complete with a necklace as an ‘extra treat’.

Premiumisation is also taking place in snack and beverage offerings with companies providing value through superior products and packaging. Branding among domestic companies also shows local players are catching on to the premiumisation trend, something that will be further discussed in part 3 of this series coming later this week.

Creative Packaging Innovations

Much attention is paid to getting the packaging correct, and rightly so as packaging is one of the categories Chinese consumers review via ecommerce. As packaging is one of the first things consumers see it should demonstrate the value of a product, communicate the benefits and clearly exhibit the brand’s ethos. Packaging is an extension of a brand and should not be an afterthought. Innovative packaging is typically well-received in China, and SIAL China showed off some of the latest concepts.

One product that we were impressed by was the incredibly secure ‘crocodile’ packaging that kept Polish cereal fresh and crisp. Cereal and big bags of snacks are often eaten over a period of days or weeks and the packaging must be easy to use and keep the product fresh. Chinese are particularly fussy over product freshness. Lids that pop off and bags that don’t seal tight are two of the top complaints when it comes to packaging.

Another inventive product was a drink from the Czech Republic that stored an ‘active substance’ sealed in the lid. The ‘active substance’, akin to an energy drink powder, is released from the lid and mixed with the bottle’s water. ‘Dosage’ control is allowed with cap settings giving you the option of one, two or three ‘doses’. Control over quantity is likely to be well-received as Chinese often complain that flavouring is too strong or that products are too concentrated.

Domestic brands are continuing to improve their packaging and meet the demands of consumers. Traditionally snacks are packaged in nondescript, low-cost plastic bags. Now brands are using more sleek and stylish packaging that makes it hard to detect where a brand is from without close examination of the package. This was more prevalent this year compared to last. An example of the superior packaging is the Beijing beer below looking as if it could be straight from Chicago or Copenhagen.

Conclusions to Food & Beverage Trends in China Day 2

The fact that Chinese consumers are trading up in droves has led to brands providing more premium offerings, both in quality and presentation. Both premiumisation and packaging are part of the mix in order to capture the Chinese consumers who are increasingly looking to try new products

The China Skinny team was out and about this past week taking in the latest trends, innovations and happenings in China’s food & beverage and craft beer scene. Attending last week’s SIAL China and Craft Beer China gave us the opportunity to reflect on how the industry has developed since the 2016 editions. Through this three-part series we will share our observations and insights into the notable trends driving the market.

From quinoa crisps to fruit snacks, organic offerings to natural, healthy desserts, the range of healthy food and snack options was bigger than before. Meat products were a particularly contentious area, with Canadian meat producers touting superiority over their U.S. counterparts, which they attributed to healthier farms and safer processing. Health is clearly being promoted across a wide variety of products with more detail and attention given to individual selling points.

Nuts and dried fruit are healthy and popular snacks in China with 40% of urban Chinese consumers eating more nuts and seeds this year compared to Fall 2016. Nuts and dried fruits were ubiquitous this year but compared to last year flavoured products were far fewer. Past years touted a swathe of flavour combinations, from honey butter almonds to chili pistachios and candied walnuts. This year, the field was dominated by plain, shelled nuts. Additionally, the nut exhibitors lacked slick marketing with many staffing booths operating solely on hired helped, displaying unattractive bowls of nuts and QR codes with no added engagement. Fun mascots, WeChat connected games, and cool sample dispensers were all absent; a missed opportunity for B2B marketing.

Fun Flavours and Product Innovation in Honey, Oils & Drinks

Innovative flavours in oils, honeys and drinks were prevalent. From orange, avocado and cedar nut flavoured honey to creamed honey in a tube, honey was one of the most experimental categories. Oil had a strong showing with flavoured olive, hazelnut and walnut oils. Flavoured olive oil was also presented in a convenient spray-able canister. When it comes to oil use, Chinese consumers re-purpose it well beyond just eating. However, we spotted only one olive oil booth that also displayed their olive oil based skincare. The brand manager noted that the skincare products had received positive reviews from the Chinese audience but hesitation regarding the ‘boutique’ price.

Fusion drinks were popular with many touting the health card by adding nutritious ingredients to make the offerings more interesting. Many of these drinks combined their products with home-sourced ingredients to give brands provenance as a further avenue to market. Maple syrup infused cranberry juice from Canada, Australian fruit cocktails and fresh French fruit and vegetable smoothies were all available. One of the more innovative products was Dip and Sip straws from Hungary that delivers flavour that stays in the straw until you suck. Straws were available for both water and milk.

China’s Frozen Food Market is Evolving

Frozen products were more prevalent than years prior. Russian ice cream, Italian gelato and Californian ice pops were all available and luckily giving out samples! The ice cream was typically marketed as a treat whereas the ice pops took the note of healthiness, offering dairy-free and fruit and vegetable variations. Domestic players also had a strong showing in frozen categories. Most of the products present were straightforward with little experimentation.

Conclusions to Food & Beverage Trends in China Day 1

China’s fast growing and dynamic market offers abundant opportunities, but consumers are diversifying along with brands. The health trend still going strong. Ever-growing product innovation and introduction means a more crowded market. That requires a smart entry or expansion. Get in touch with China Skinny if you’d like to know more about how we can assist in your specific product category, product innovation or China plan.

Read part 2 and part 3 of China Skinny’s Food & Beverage Trends in China series.

China Skinny recently attended the Asia Pacific Business Outlook conference in Los Angeles. As an agency servicing brands in both China and abroad, we find it valuable to hear perspectives about China from businesses who are both close to the market, and an ocean apart. The conference was full of enlightening details regarding the Mainland China market. Below are five key takeaways from the conference.

China is becoming more competitive as both domestic and foreign companies focus on expanding their offerings in the “Middle Kingdom”.

The opportunities in China, particularly among China’s middle class, were detailed throughout the conference. China’s economy is growing at 6.5% per year, which is the equivalent of adding Switzerland to its economy each and every year. With this growth, China’s upper middle-income group is projected to expand from 7.1% of the population in 2015 to 19.7% in 2030. This means a new consumer class of more than a hundred million strong, eager for products and services for their new lifestyle.

The massive opportunities in China might make it easy to think that your brand needs to be there tomorrow. But don’t make the mistake of rushing in and making fatal missteps such as Marks & Spencer’s, Home Depot or even slight blunders such as Nike.

Go slowly, conduct due diligence on specific categories, product size, packaging, price and branding in order to make educated moves. Fully research and get to know your partners to avoid being burned. Get covered legally, protect your IP, and minimise the unpleasant company of trademark squatters. One thing you should do now is to register your IP even if you aren’t thinking about entering China just yet. A middle term to-do list should include investing in research and trips to fully understand the market. This brings us to point three.

Know your customer

Taking time to know the China market means deeply understanding your target market. Too often we talk about selling to China in vague terms. Instead of ambiguous thoughts of who the target market is, you need to discover who they are, what they like, and where and how they shop. Maybe more so than anywhere, the customer journey in China is unique. Don’t just sell to the ‘China market’ but rather a carefully crafted segment. Dig deep to understand the people in the country, and they will be drawn to dig deep about you and your brand.

When discussing who the Chinese consumer is, millennials were brought up again and again. Nearly as big as the entire population of the U.S., this group cannot be ignored. It’s not only the size of the group but also their expendable income, desire to shop, and international mindset. This group of Chinese consumers is unique even within itself with those born in the 80’s and 90’s exhibiting different characteristics, with notable variances geographically. This group is extremely aware that Chinese products may not perfect, but they are also extremely proud of China. They are more independent and identify with brands that understand them and cater to their needs and desires.

Business is still moving forward despite the uncertainty brought on by Trump administration.

Lastly, in today’s world one cannot go to a conference about doing business abroad without mention of the U.S. president and his administration. There are a lot of uncertainties and unknowns with the Trump administration. The key direction is not yet set, and there is much left to be determined. While calamity is a possibility there is also a chance that business opportunities may increase at a rate never seen before. While negative sentiment among Chinese consumers is understandable, the full effect of the Trump show is yet to be seen and there are reasons for optimism. Stayed tuned.

Whilst U.S. brands exporting to China have their own sets of challenges, many of the opportunities are within grasp for brands with the right approaches.

This is part 2 of China Skinny’s observations at the SIAL Exhibition. Check out part 1 here.

In addition to wafers, coconut products, nuts and inventive flavourings China Skinny observed a few more interesting trends at SIAL.

Rising trend of freeze dried food

Freeze dried food was one of the noticeable trends of the show. Freeze dried involves pulling the water out of fruits and vegetables while leaving the taste, texture and nutrient content almost 100% intact. This makes for easy logistics and is growing in popularity with Chinese consumers. Popular freeze dried products were sweet potatoes, taro, corn and about any kind of berry.

One interesting observation was not only the freeze dried products promoted on their own, but also with other ingredients. For example, Singaporean brand Gulliver utilised freeze dried fruits inside their chocolate. Freeze dried fruits showed up in everything from chocolate to gummies, cereals and more.

Innovative packaging

As SIAL is ‘China’s largest food innovation exhibition,’ it is only fitting that innovative packaging is central to the show. From alternative snack packaging sizes to resealable packs, packaging within packaging (a big package with smaller packs inside) and different bottle materials and shapes. There was no shortage of new sizes, styles and even shapes in packaging coming into China. What it comes down to is what sells.

A marketing manager of an Italian cookie brand stated that with all the packaging available, their best seller is big packs of cookies. Working alongside Walmart, the rep attributed the popularity of the big packs to their weight so consumers felt as if they were getting more for their yuan. The package is large and heavy, not filled with air like so many other packaged snacks. If the value play is driving sales, it shows the further complexities of the Chinese consumer – each brand has to have the right mix of characteristics to be considered for purchase.

Copycats

While nothing as big or blatant as Uncle Martian, this being China there are bound to be copy cats. Two of our favorites were a Nutella knock off and Ritz stand-in. There were also an increasing number of Chinese brands sourcing ingredients internationally. These products looked as if they were from abroad, but with a closer look it was clear the brand was Chinese. Products posing has foreign but in reality a Chinese brand are not likely to fool Chinese consumers who do much more research about their purchases than their Western counterparts.

In conclusion

China is a competitive and fast changing market, something that can be seen at SIAL every year. What stuck with us the most was words from an imported sauce brand. This particular brand sells fish sauce and had tested with Chinese consumers who stated they liked the sauce and would use it at home. This was a product that is familiar to Chinese and fits their palate, but the brand representative said the product was not selling well in China and attributed low sales to the fact that the brand is not well-known among Chinese consumers. This goes to show that even if the product, packaging and price are perfect for your target market, the right marketing mix must be spot on for a chance at success in China. China Skinny can help with this.

The act of shopping has spread across different countries in unique ways, and each market has adopted its own local habits, trends, influences and behaviours. China is a country where shopping plays a huge role in daily life, as consumers regard shopping a higher priority in their lives compared to other markets. The graphic below illustrates to what extent shopping shapes Chinese’ lifestyles.

Christmas is not a tradition normally associated with China. However, despite the seemingly irreconcilable contradictions between a highly commercialised Christian holiday and the world’s largest Atheist and Communist state, Christmas in China is growing to become big business. So can a Chinese Christmas be boiled down to a purely commercial phenomenon, or does the increased eagerness of Chinese consumers to celebrate Christmas indicate something deeper? Read on to get the festive skinny!

Celebrating Chinese Style

A Christmas tree made out of yarn in Beijing and Santa playing his sax

Apples wrapped in colourful paper carved with the characters for Christmas Eve – Ping’ānyè 平安夜, the unsolvable riddle of Santa – shèng dàn lǎo rén 圣诞老人 – playing a saxophone, towering Christmas trees fashioned out of yarn, shoes or handbags, malls dripping with tinsel and glitter and populated by a brigade of Santas – Christmas in China has its own unique flavour. The tradition is going from strength to strength and is particularly popular among young Chinese (aged 15-45) who tend to be more open-minded about foreign traditions than the older generation. Christmas traditions in China are often propagated by Sea Turtles who have returned home from studies abroad, and bring back with them a fondness for the tradition.

In China, Christmas is perceived as an event to be celebrated among friends rather than family, and although Chinese workers receive no official holiday, Christmas is often used as an excuse to kick-back and relax. In this sense Christmas amongst Chinese consumers is often perceived akin to how those in the West treat Valentine’s or St Patrick’s Day – as a more informal and unstructured holiday. The occasion even carries romantic connotations, with some couples evoking the mantra ‘Silent Night, First Night’ to take their relationship to the “next level”. Finally, and most importantly, Christmas is a great excuse for Chinese consumers to shop until they drop, with tempting new Christmas themed sales springing up year after year. Sales remain modest in comparison to major holidays such as Chinese New Year and Single’s Day, however they continue to rise. For example, luxury shoppers spend an average of US $221 over the Christmas period.

So far, Christmas spirit has been largely confined to China’s first and second Tier cities, and it remains to be seen whether Santa’s sleigh will reach the Mainland’s rural frontiers.

Digital Christmas

With 668 million sophisticated internet users, getting to grips with China’s complex online environment is the silver bullet for cracking the Chinese market. In recent years, Christmas has become an increasingly hot theme used by digital platforms and apps. WeChat – China’s most popular social media channel – has launched a number of creative features designed to whip up festive spirit amongst Chinese users, including the option to send WeChat Christmas cards and share ‘festive sights’ with friends. Upon typing ‘Christmas’ into the popular app, users will be rewarded with a flurry of tiny Christmas trees descending across their screen – if that’s not enough to get anyone into the festive spirit I don’t know what is.

International brands wishing to tap into China’s Christmas market via digital channels can take inspiration from brands such as Harrods. One of the UK’s oldest and most iconic department stores, Harrods has been particularly forward-thinking when it comes to targeting Chinese consumers via digital channels. The store was the first British retailer to launch an official WeChat account, and has implemented a variety of creative campaigns to target Chinese shoppers, including the store’s highly successful ‘Harrods’ Christmas Treasure Hunt’ campaign on Weibo. Harrods’ sensitivity and attention to detail when it comes to engaging Chinese consumers via digital channels has paid off, enabling the store to soak up an astonishing 20% of Chinese Mainland shoppers’ spending in the UK.

Made-in-China

Known as the world’s factory, if Chinese consumers aren’t celebrating Christmas there is a good chance they are making it. With one single city in China, Yiwu 义乌, producing 60% of the world’s Christmas decorations, China is the largest exporter of Christmas supplies, producing Christmas goods galore for almost 200 counties around the globe. However, for the migrant workers earning between $200 and $300 a month, and notching up 12-hour-plus shifts, 6 days a week in the run up to Christmas, the festive season is not so merry.

Festive outlets linked to factories such as those in Yiwu are facing stiff competition from China’s ecommerce giants, who have become increasingly invested in pushing Christmas sales in the period which typically sees a drop-off of retail sales following Singles Day in November. In the lead up to the festive period online browsers can see the logo on Alibaba’s online shopping mall to have donned a Santa hat with campaigns such as a Christmas lottery promoted to Alibaba’s 367 million active users.

Following the troubling slump in manufacturing production and exports that followed Europe’s financial crisis, factory production in China has finally started to pick up, with exports of festive products from China’s Southern powerhouse provinces rising 30% to reach $1.13 billion by the close of 2014. For these factories, Christmas is not only a huge economic opportunity, but for the millions of workers they employ, the festive season is a lifeline for supporting themselves and their families. A great excuse to overspend on tinsel this year.

Christmas with Chinese Characteristics

So is Christmas just an excuse for Chinese consumers to enjoy a shopping blow out, or does it symbolise something deeper? Undoubtedly, Christmas in China has a strong commercial edge, however Christmas celebrations also demonstrate the extent to which China’s once closed-off culture has become increasingly open and receptive to global trends and concepts. The Chinese, instead of consuming a pure distillation of Western Christmas traditions, have adapted these norms to their tastes and cultural customs – and so Christmas (with Chinese characteristics) has metamorphosed.

To many (although not all) Chinese, it simply no longer matters whether a tradition is Western or Chinese. Christmas is even viewed by some Chinese as a benchmark of progress in this rapidly-developing country; with for many, the opportunity for Chinese of all backgrounds to enjoy increasingly mainstream international celebrations being symbolic of China’s increasingly prominent position in the world.

…and that’s something that all of the team members at China Skinny wish for our loyal readers around the world too! Merry Christmas – Shèngdàn jié kuàilè 圣诞节快乐!

The Alibaba shopping-mania continued with this year’s Singles’ Day reaching a stunning $14.3 billion sales. It not only showcases the enormous reach of China’s biggest internet retailer, but also the pace Chinese spending power is increasing. Growing by 60% compared to last year, Singles’ Day has evolved to a global shopping festival. Below is the digest on Singles’ Day 2015 in China Skinny’s newest infograph.

The pressure is on. Michael Evans, President of Alibaba Group, said it best in the lead up to Singles Day that “Over the past decade, Alibaba measured our impact and our success by how much we changed China. Going forward, we will be judged by how much we change the world.” This Single’s Day, all eyes will be on what steps the company makes to change the world.

Although vague about specific plans to expand worldwide, we see three distinct actions directly relating to Alibaba’s internationalisation efforts.

Turning Singles Day into a Worldwide Day

Traditionally the Chinese government has been looked upon to provide support, growth and well-being for its citizens. In China, government support is shifting from solely state-run organisations to private companies as well. Alibaba is one of the three main Internet players in China, so naturally they have a big role to play in this structural change. All eyes are on Alibaba as it delves deeper into domestic markets and probes outward into foreign markets.

Alibaba aims to bring Singles Day to the world.

Once solely a Chinese celebration, Single’s Days is now being pushed worldwide. Each year Single’s Day growth in sales leads to a rise in media hype. And for good reason. Last year’s Singles Day sales reached ¥57.1 billion ($9.3 billion) which is expected to be surpassed this year. In just one minute and twelve seconds GMV sales reached ¥1 billion with total GMV for cross-border commerce surpassing last years numbers in one minute and 45 seconds. In 2014 consumers in 217 countries and regions shopped up a storm with over 200 countries doing the same just one hour and 15 minutes into the event. An international angle is being heavily pushed with foreign products being front and center in advertising and promotions in China. Now it is time to see if Alibaba position itself overseas as successfully as it has in China. An example of recent foray to reach markets outside of China Alibaba is marketing in southeast Asia through online advertising, videos, and social media in order to raise their profile. While smaller markets may be easier for Alibaba to gain ground in, it is yet to be seen if Alibaba can gain a foothold in more developed markets such as North America and Europe.

In the U.S. November 11th is already a holiday, Veterans Day. Many retailers already offer Veterans Day sales and discounts. The following period between Halloween and Christmas is loaded with shopping holidays and promotions. This could go either way for Alibaba: Americans might embrace another day with killer discounts or they might disregard Singles Day as just another day. Alibaba has been cautious in their U.S. efforts to this point, and going in head first is not in their best interest. It will be interesting to see where Alibaba’s North American efforts lead.

Post Partnerships

Another advantage for Alibaba as they move into international markets is their partnerships, specifically those with post offices around the world. Partnering with postal groups from Australia Post to Singapore Post to the U.S. Postal Service implies that Alibaba is developing inroads into economies outside China. Although there has only been limited details concerning the opening of these routes they are likely beneficial to Alibaba in two key ways: sourcing products to bring to China and delivering Chinese products to the world.

Cross-border commerce is a main component of partnerships helping companies tap into the Chinese market. But commerce is a two-way street and Alibaba’s efforts to develop logistics worldwide is something to keep an eye on.

A Star Studded Shindig

Who doesn’t like a party? And what better way to bring Alibaba to the world? Much like the TV show leading up to China’s biggest holiday, Spring Festival, Alibaba is hosting a gala the night before the big shopping day. Complete with big celebs from star director Feng Xiaogang to America’s Adam Lambert and an ad from Kevin Spacey as the President of the USA as well as guest appearance from Britain’s Daniel Craig. Alibaba’s gala ensured that there’s plenty of attention on Singles Day, signaling the efforts to make it a true holiday. This effort of course starts in China but we wouldn’t be surprised if Alibaba promotes and encourages celebrations worldwide much like we see Chinese New Year decorations and celebrations worldwide.

Singles Day is one part of the major effort to make Alibaba as synonymous with shopping in the West as it is in China. This is the next test for Alibaba’s foray into other markets and we will be watching closely.

The Early Results

By 1:15am, consumers from 200 countries and regions had made a purchase. Chinese couldn’t get enough international products, with Japan, USA, Korea, Australia and Germany being the top-5 origins in the first hour. Top imported brands included Aptamil, Nurtion, Bellamy’s, Cambridge Sachet, Missha, Coach, Avenue, YSL and Clarks.

As a lead up to the strike of midnight Alibaba aimed to keep China’s online shoppers awake and engaged. The Pre-Singles day gala put on by Alibaba and exclusively aired on Hunan TV engaged watchers and shoppers with a big night of entertainment. China Skinny was hosted by Alibaba to attend the big event and was able to soak up the buzz from the night. Below are some highlights from the Singles Day gala. Be sure to check back to find out more about the astonishing facts and figures from this years Singles Day.

The lead up to Singles Day was held for the first time in Beijing. The venue was the Watercube in the Olympic Village.

Fans waited in the cold to catch a glimpse of their favourite entertainers.

Quiet before the storm.

Shakers and shoppers both at the event and at home were kept engaged through their mobiles.

11.11 Branded Coca-cola.

Games and contests took place and watchers were encouraged to play along voting for red or black to be entered for a chance to win imported milk, bed sheets, robotic floor cleaner, a flight to America or one of eleven cars for 1RMB.

While all of us have enjoyed the results of Chinese inventions from paper, printing, tea and porcelain, to the less-cited toilet paper, pasta, ice cream and football, it’s likely we’re going to benefit from many more in our lifetimes, particularly in the technology category.

Building efficiency, isn’t just about creating shorter queues in hospitals, making paying for things easier, or more efficient ride sharing. It’s also servicing those softer, but still important needs such as customer service.

In short, Chinese consumers are receiving technology-assisted service and convenience. This has helped build an ecosystem of innovations that are increasingly moving beyond Chinese borders, and it is also a reason Chinese have growing expectations when buying a product or service, which need to be met or exceeded. China Skinny can help with that. We hope you enjoy this week’s Skinny.

Chinese Consumers

The Wild, Wild East: China’s urban consumption will almost double from $3.2 trillion today to $5.6 trillion in 2020 according to BCG. Whilst many are talking up inland China as the biggest untapped opportunities, there are still many up-and-coming cities in eastern China such as Suqian, Xuzhou and Wuhu, and still lucrative niches in the crowded Tier 1 markets of Shanghai, Beijing, Guangzhou and Shenzhen.

Three Reasons Why Chinese Consumers Love the Queen – and Why Britain Should Too: When Chinese consumers were asked which words they associate with Britain, top of the list was the Queen. 27% of Chinese shoppers said they get their inspiration for fashion and home style from the Queen and the royal family, with the royal warrant important for increasing desirability of British lifestyle and brands from more than half of those surveyed, according to Qing Wang from the University of Warwick Business School.

Best CRT Post Today? Not in China: China’s advertising laws have been overhauled this month, imposing fines of up to ¥1 million ($157,350) for brands that use superlatives such as the “highest”, “best” or “national level”. Brands are also banned from using child stars under the age of ten to promote their products.

Internet, Mobiles & Ecommerce

It’s All Go: Venture-capital investment in China reached a record $15.5 billion in 2014, more than triple 2013’s level. China has more than a dozen tech businesses with a valuation of over a billion dollars. “Chinese consumers are now so demanding and globally minded…you need to be world-class to serve China,” says Gary Rieschel of venture-capital firm Qiming Ventures.

How to Buy a Xiaomi in Two Short Months: Xiaomi may be the world’s second most valuable startup after Uber, and China’s top selling smartphone brand, but it still isn’t straight forward to buy one of their devices. How long will the flash sale marketing tactic work for them with brands like Huawei nipping at their heels?

A Day in the Life of a Chinese App Addict: Last year, Chinese smartphone users downloaded 185 billion apps, 59% of all downloads worldwide. Gaming apps were the most popular category in China but shopping, video-streaming, and image-and-video apps for social media are catching up quickly.

China Plows Big Money Into Australian Agriculture: Chinese consumers perceived Australian-grown food to be three times as safe as food grown in China, and 50% healthier than food grown in the U.S., Brazil or France according a Reputation Institute survey in 2013.

Chinese Tourists

Robust Growth Forecast for China’s Outbound Tourism: 42% of Chinese tourists surveyed said they were willing to spend as much as 20% of their living expenses on travel according to World Tourism Cities research. While outbound tourism numbers grew 11% last year, their spending increased 28%.

Dutch Villages, Small Cities Look to Attract More Chinese Visitors: Dutch villages such as Giethoorn are seeing two thirds of their hotel guests coming from China. They’re catering for the visitors with initiatives such as Chinese language travel cards, smaller bicycles, firmer beds and noodle cookers. Chinese visitors to the Netherlands grew 15% last year and are expect to grow 18% this year, spending almost twice as much per person on average.

Health

Toads Skin, Herbs Feed China’s $2.7 Billion Cancer Fight: Sales of traditional cancer treatments, with ingredients such as toad skin and turtle shell, surged 35% to almost ¥17 billion ($2.7 billion) last year in China. That’s twice as fast as the 17% growth for the overall ¥65 billion ($10.2 billion) cancer drug market. A new cancer case occurs every 10 seconds in China.

Although China’s stock markets have been hogging the headlines of late, it is real estate that has long been the focus for most Chinese investors. Unfortunately China’s residential property hasn’t had a great run over the past year and a half, but there are signs of things improving.

Although the Shanghai stock exchange is still around 40% higher than it was a year ago, the recent plummet has spooked a lot of Chinese to look for alternative places to invest their cash. While many will resort back to domestic property, more and more are looking for stable and transparent assets abroad.

The U.S. is the preferred investment destination for 42% of respondents, made attractive by its robust economy, looser visa restrictions and high quality education. America’s reputation has even seen one of its leading investment banks, Goldman Sachs, counterfeited in Shenzhen. Hong Kong, Australia, Canada and the UK are the next most popular destinations.

Housing is, and will remain, the most attractive investment option domestically and abroad for the growing pool of Chinese investors. 77% of those surveyed by FT owned at least one overseas home. Vancouver has seen an 80% increase in houses selling over $3 million over the past year, of which 70-75% of purchasers have Mainland China connections according to estimates. Although the RMB has dipped a little lately, it is still up on most currencies compared to 12-months ago, which will make overseas investments an increasingly appealing option for China’s growing wealthy classes. We hope you enjoy this week’s Skinny.

Chinese Consumers

Majority of Chinese See Benefits From Trade: 69% of Chinese consumers view greater availability of products from different parts of the world as a good thing, versus 10% who don’t according to Gallup. The most positive are 15-24 year olds at 79% and 25-34 year olds at 73%.

Baidu Wants to Use Your Phone To Make Malls Smarter: China Mall 2020: Baidu’s new app Connect will link shoppers with brick and mortar stores. It can track locations to the accuracy of a metre, even inside shopping malls, sending them relevant promotions and communications while collecting valuable data. Shopper movements can also be tracked in-store to help shop designers better understand and position products and promotions.

Fake Rice Made With Paper Found In Guangdong: Fake rice made with tiny bits of rolled up paper were discovered in Guangdong after a woman noticed her lunch was harder to chew than normal. The incident follows reports of fake plastic rice earlier this year.

12.5% Of Beverages Failed Chinese Inspections In First-Half Of Year: One in eight beverages sold in China inspected by the China Food & Drug Administration this year did not meet minimum standards. Excessive bacteria was the top reason, followed by poor quality, illegal or excessive additives, heavy metal pollution and chemical residue. Ice cream and aquatic products were the worst performing foods.

German Food Exports To China Surge 47% In First Half: Chinese trust for German-made cars and machines is transferring to other products, with food and beverage exports to China growing 47% between January and June this year. Overall imports grew less than 1% on the back of weak demand for cars.

Chinese Tourists

Chinese Tourists Continue To Spend Despite Economic Turmoil: The share of Chinese households with annual disposable income above $55,000 tripled in just five years, contributing to growing numbers of consumers who can afford to travel. While Chinese tourists have declined to Hong Kong, more than twice as many Chinese visited Thailand than a year earlier and Japan’s July visitors from China more than doubled in 12-months. Australia had 16% more Chinese tourists this July, who are on track to top the 6% they contributed to the country’s 2014 economic growth this year.

Investments & Finance

Downpayment Requirements For Second Homes Lowered In China: China is hoping to increase house sales by lowering minimum down payments for second home purchases from 30% to 20% – the same as first homes. The new policy applies across China, with the exception of Tier 1 cities Beijing, Shanghai, Guangzhou and Shenzhen who can determine their own rates.

Shenzhen Goldman Sachs Is China’s Latest Fake: A local financial leasing company in Shenzhen is using both Goldman Sachs’ English and Chinese name as its own. American banks aren’t the only target for counterfeiters: a fake branch of China Construction Bank, the world’s second largest bank by assets, was discovered last month in the city of Linyi, Shandong Province.

Entertainment

Alibaba Launches Subscription Video Streaming, Priced At $57 Per Year: Alibaba has launched its Netflix-style subscription video service, TBO – Tmall Box Office. Users can stream a mix of Chinese and foreign movies and U.S. TV shows. It is the first time a service has been launched in China that locks all content behind a paywall. Monthly or yearly subscriptions are priced as low as ¥1 (16c) a day.

The shift from luxury purchases can be partially blamed on the Government’s crackdown on gifting, but it also represents altering shopping preferences. Over the past few years, Chinese consumers have increasingly scrutinised over value when researching products and services, rather than assuming something is better because it is more expensive. A similar transition has happened in markets like the U.S. – it just took decades, unlike the few years it took in China. In many categories, Chinese consumers’ sophistication has become similar to Western markets, even surpassing them in areas such as mobile commerce and O2O.

Experiences and health are two segments Chinese are placing a lot of value on. Experiences can come from using a beautifully smooth and functional smartphone to support countless aspects of their lives, or a holiday away from the tour groups with authentic experiences – a trend that has been recognised by companies like AirBnB who are hiring a CEO locally in China. Health spans beyond pharmaceuticals and medical devices and includes things such as safe, healthy food and beverages. This has seen brands like Korea’s Genesis BBQ chain localise in China by cooking in premium olive oil, with sales increasing 300% last year.

In short, Chinese consumers are still prepared to pay a high price for goods and services, if they are getting more value than lower cost alternatives – particularly if is healthier or will give a better, more authentic experience.

Chinese Consumers

¥796 Million Retrieved For Disgruntled Consumers In China: Chinese authorities retrieved around ¥796 million ($130.07 million) in the first half of 2015, not far off the ¥920.02 million awarded for the full 2014. 290,000 individual consumer complaints were made, with household items and electrical appliances, clothing and shoes, communications equipment, home decor and food safety among the most common subjects of complaints about goods.

With New Shanghai Restaurant, Gucci Serves Up Taste Of Tuscany To Grow Sales: First it cut prices by up to half in China. Now Italian luxury fashion label Gucci is trying to sell the dream of the “old country” by launching the 1921Gucci restaurant in Shanghai’s iAPM mall, named after the year the brand was founded. The initiative was led by the change in consumer behaviour, from the pursuit of brands, to the product itself, and now to lifestyle.

China’s Wanda, Baidu and Tencent Launch Ffan E-Commerce Site: FFan, the billion dollar ecommerce venture between Wanda, Tencent and Baidu launched earlier this month with the goal of encouraging online to offline, click and collect type offerings, tying in with Wanda’s physical malls, department stores and cinemas. Although the launch was limited, Wanda is aiming for 100 million loyalty scheme members by the end of the year.

A Parable Of Oreos And Ovens: Oreo has seen its market share drop from 9% to 6% since 2012 as Chinese get more aware about health. Although the ‘Oreo Thin’ sales are looking good, cookies are increasingly facing competition from home bakers, who can create snacks without preservatives and additives. Sales of benchtop ovens have reportedly more than quadrupled since 2008 in China.

Localization Strategy of Genesis BBQ in China: Korean BBQ chain Genesis has localised in China by offering premium cafes that use healthy ingredients such as 100% Extra Virgin Olive Oil. They have also improved the menu and concept to accommodate family dining and implemented extensive Weibo and WeChat marketing. Sales in the chain grew 300% last year.

Chinese Tourists

Airbnb’s Clever Strategy In China May Outshine Uber’s: AirBnB has started its search for a CEO for the Far East, as it focuses on outbound travel from China. The focus on Chinese travelling abroad means that it is likely to have an easier road than Uber in the market.

Entertainment

The “YouTube Of China” Is Acting More And More Like YouTube: Youku Tudou is following Youtube, Alibaba and Tencent’s foray into content production, pledging ¥10 billon ($1.6 billion) towards producing “professional-generated content,” – high-quality videos made by semi-pros. China’s online video industry generated almost $4 billion in revenue last year, although Youku Tudou spent $80 million in licensing fees just in Q1 this year.

Fashion

New Wave Of NYC Fashion Designers Launch On Taobao: Over the past week Alibaba worked with five recent design graduates from New York’s Fashion Institute of Technology and another 100 up and coming designers to display their fashion on a virtual Taobao catwalk. To provide extra support, a Taobao partner factory in China produced larger quantities of designers’ outfits that drew sufficient orders during the Aug. 20-23 presale period.

There has been a slew of recent coverage about Chinese FMCG brands outsmarting foreign players with faster growth rates. Local brands often better understand customer needs and meet them with nimble product development and marketing. They also have strong distribution networks in Tier-3 and lower cities, which boasted 8% growth last year, versus 2% in Tier 1 and 2 cities.

However, FMCG is only one part of the supermarket shop for Chinese consumers, with premium imported goods increasingly taking up more space in trolleys. Imported food grew three times faster than FMCG in China last year.

China Skinny’s research has found that as consumers earn more in China, they are spending a larger share of their incomes on food and beverage – converse to how most developing countries evolve. Companies like Danone are selling off local brands as they are struggling to compete with premium imported products attractive to affluent consumers, and local products which appeal to price-sensitive consumers.

Savvy Chinese investors have been quick to recognise the rising demand for foreign food brands, scooping up companies such as America’s largest pork producer Smithfield Foods, Britain’s Weetabix, Italy’s Salov Olive Oil and Israel’s largest food producer Tnuva. They’re not just going for brands too; having signed agribusiness deals in more than 40 countries since 2005, with Australia, New Zealand and the U.S. attracting the highest number of major investments.

While many foreign food and beverage brands may not have the same depth of understanding and ability to adapt to the market as much as local brands, they have an enviable reputation for safe, clean and transparent products that Chinese brands won’t be able to match for some time yet. If imported brands can compliment that with stronger insights and marketing, there’ll be no stopping them in China! China Skinny can help with that. We hope you enjoy this week’s Skinny.

Chinese Consumers

What A Cheap Yuan Means For Rest Of the World: China’s Central Bank’s decision to let the yuan drop 3.5% over two days last week will see commodities continue to slump, raise the price/lower margins on imports into China, and make overseas travel and shopping more expensive. It won’t help the already-wounded luxury sector, where 70% of sales to Chinese are outside of the Mainland.

Why Do We Drink Wine In China?: Wines suit the new generation of Chinese post-80s consumers as they stress differentiation and personalisation, as opposed to Baijiu, which many consider an outdated form of unification.

JingDong reports 82% sales growth in the second quarter: The value of goods sold on JingDong reached $18.5 billion in Q2 – less than a fifth of Alibaba’s sales, but growth was more than double at 82%. The company also purchased a 10% stake in Chinese supermarket chain Yonghui Superstores for $700 million and will offer food delivery services through the chain.

WeChat Rockets To 600 Millon Monthly Users: WeChat added 51 million monthly active users between April-June this year, although Tencent is still tight-lipped about how many are based in China – we know that most are.

Xiaomi At 5 years Old: Infograph illustrating the remarkable journey Xiaomi has made to become a $45 billion company in just five years.

Chinese Tourists

Priceline – The Big US Web Firm That’s Figured Out China: Unlike other big Internet players in China, online travel agency Priceline is making good headway, through its shareholding and integration with Ctrip, advertising spending on Baidu and Qunar, and 11 offices in the country.

China is famous worldwide for its unique consumer trends. From ‘Face-Kinis’, to the ‘Belly Button Challenge’, to weird and wacky fashion fads, Chinese consumer culture is always throwing up new ideas and products which can prove puzzling to the outside observer. But what can these unusual trends teach us about China’s rapidly evolving consumer dynamics? – It turns out a lot! Read on to learn more…

“The Belly Button Challenge” – fan shou mo duqi – 反手摸肚脐

One of the biggest fads on Chinese social media this year has been the Belly Button Challenge. Chinese social media users are dared to reach behind their backs and touch their belly buttons to determine if they had the “ideal” figure and don’t need to lose weight by some questionable logic. In less than two months, the craze had received almost 300 million views on Weibo. Although the challenged is based on no scientific evidence and accused of encouraging unhealthy body image and eating disorders, it continues to attract social media hits from women aspiring to be baifumei (白富美) – pale-skinned, rich, and beautiful.

The fad has been followed by the “Collarbone Challenge” (锁骨放硬币 – suo gu fang ying bi). In an equally peculiar vain, women measure their slimness by stacking coins within the gap of their collarbone. China’s obsession with beauty carried on with the “Taylor Swift Leg Challenge” (Taylor Swift：你的腿可以横跨几个人- ni de tui ke yi heng kua ji ge ren). Inspired by Swift’s long legs, Chinese women posted pictures of themselves stretching their legs across as many people as possible to show off the longness of their own pins.

The appeal of these campaigns lies in their simple and accessible “do-it-yourself” nature, and all of them showcase the power and influence of Weibo as a viral marketing tool.

Crush Crush Tribe – nie nie zu – 捏捏族

First emerging in the summer of 2009, this strange phenomenon quickly spread from China’s mega cities to second and third tier cities. The Crush Crush Tribe are typically white collar workers who, in an effort to release stress from busy urban lives, go to shops and take out their frustration by secretly crushing and stomping on food products. Popular groceries include dried noodles, soda drinks, and cookies.

The phenomenon has proved a popular topic on social media. There is an account dedicated to the “art” of crushing on the popular QQ messaging service, providing a central discussion point for tribe members. The page discusses the psychological benefits of crushing products, with users describing the satisfaction they feel as they destroy items. Many “crushers” tout the craze as a valuable form of catharsis and stress release.

Most attribute the Crush Crush Tribe’s origins to the increasingly pressurised professional and social lives of modern urban China. Many “crushers” identify as Diaosi; white collar workers with dim professional or romantic prospects. For example, one member of the QQ account explains his passion for crushing dried supermarket noodles as driven by solitude, claiming: “It’s not instant noodles that I’m crushing, it is loneliness”. However, the Crush Crush Tribe’s actions have been deemed an irresponsible fad by many; not least shop keepers, who claim the trend is “immoral” and reflective of a “sheep-like” mentality amongst Chinese consumers.

Since peaking in 2009,the Crush Crush Tribe’s ranks have depleted considerably in recent years, with “crushers” splintering off in favour of other kooky forms of tension relief. Amongst them are the “Rip Rip Tribe” (拆拆族) who split open packages of socks and underwear, and the “Switch-Switch Tribe” (调包族) who take out their frustrations by mixing and matching different products in similar sized packages. Nevertheless, there’s no shortage of evidence of continuing frustration of shoppers’ mischief within supermarkets aisles across China.

“Face-Kinis” – liǎnjīní – 脸基尼

Coming to a beach near you! Since their invention in Qingdao in 2006, the slightly creepy design of Face-Kinis (脸基尼) has attracted attention around the world. The latex masks cover the wearer’s entire face and neck, aside from small holes for the nose, mouth and eyes, withthe added bonus of protecting wearers against jelly-fish stings..More than 30,000 of the masks sold in 2014.

The popularity of Face-Kinis is consistent with the traditional idea that dark skin is unattractive in China. Those with a dark complexion are often associated with poor rural laborers who work long days in the sun, whilst pale skin is seen as a mark of high social class and refined culture. The Face-Kini is just one of a long line of weapons available to Chinese consumers including the ever-popular sun umbrella – tai yang san 太阳伞.

Face-Kinis are worn by Chinese women beach-goers of all ages. Even men occasionally don the mask. However the typical Face-Kini wearer is a mature woman – a powerful consumer demographic which marketers often overlook, or find difficult to successfully access. By 2050, it is estimated that one third of China’s citizens will be over 60, over twice the current proportion, so it’s clear that businesses that are able to successfully understand and tap into this demographic will reap significant rewards.

“Weird” Foods

International visitors to China are often fascinated at the diversity of unusual food and drinks available to them. Flavours, textures, and tastes, as well as the development, packaging and promotion of products all take on a unique twist within the Middle Kingdom. Many Western companies have adapted their products to local tastes in China. PepsiCo markets its Lay’s potato crisps in flavours ranging from cucumber to the Sichuan classic ‘Numb & Spicy Hot Pot’ to ‘Hot & Sour Fish Soup’. While Mondelez has adapted the universally popular Oreo cookie to Chinese consumers’ tastes with flavours such as green tea, and ‘Birthday Cake’. Other products deemed peculiar to Western tastes are Quaker’s beetroot and sun-dried tomato flavoured instant porridge. McDonalds’ metallic grey-coloured ‘Black Sesame Soft Serve’ ice cream and matching silver cone is a popular choice amongst Chinese consumers.

Within China, consumer taste buds vary massively, with consumers in different regions preferring a wide spectrum of flavours and different styles of products. For example, Shanghainese are famous for enjoying sweeter food, while consumers in Chongqing are obsessed with all things spicy.

These unique quirks, combined with the complexity of the Chinese market, necessitate that brands interested in marketing to Chinese consumers get serious about ‘localising’ their products to suit Chinese consumers’ tastes and preferences. Consumer-led market research and product trials are a great way to do this.

China’s “Vampires” and their ‘Blood Bag’ Drinks

The “Vampire Craze” has been a growing trend in Chinese youth culture for the past few years, however the popularity of this trend has recently picked up speed with the popularity of American TV drama, ‘Vampire Diaries’.

Within China a small teenage sub-culture of “vampires” has emerged, creating an increasing demand for quirky Gothic products, merchandise and vampire themed activities. This demand has seen the creation of products such as ‘Blood Energy Potion’; drinks which are decanted into, and consumed from plastic IV bags. The goriest version is the “Blood B-Type” drink. Pitched as the world’s first blood substitute beverage, “Blood B-Type” is designed to mimic the nutrients, colour and texture of real blood.

However, these creepy Gothic drinks have not gone unnoticed by the Chinese Government. Last July, China’s Food and Drug Administration (the CFDA) banned the drinks – citing concerns about the product’s safety and their impact on young adults in China. The CDFA claims the drinks, and their provocative marketing strategy “violates social integrity and moral principles”. The ban demonstrates the need for marketers in China to toe the official line.

Despite this ban, aspiring vampires can continue to stock up on their favourite drinks via China’s largest online platform Taobao as well as enjoy their favourite blood beverages in vampire themed cafes across China.

Shamate – 杀马特

Shamate are a subculture of young Chinese rural migrants. Typically with little formal education, stuck in low-skilled jobs and living in overcrowded apartments, Shamate can be considered the polar opposite of xiaoqingxin (小清新) – China’s well-travelled, educated, and privileged youth. The group’s distinctive fashion sense is a mix of Goth, glam and anime fashion, with heavy eye make-up and hair bleached in bright colours a Shamate style staple.

The term is a Chinese transliteration of the word smart, and the insult “Idiot Shamate” (“脑残杀马特”) is a popular put-down bounded around on Chinese social media channels with the purpose of describing anything considered tacky or coarse. Shamate are popularly perceived to be backwards hicks who don’t belong in the city and are therefore seen as fair game for mockery. Popular disgust directed towards Shamate is a reflection of China’s rapid development, and the class strains that this has created. The discrimination facing Shamate is part and parcel of a wider societal and institutional bias against rural migrants in China.

Yet whilst social media is widely used to ridicule the Shamate, it is also a platform from which this urban sub-group can make friends in the unfamiliar cities they move to, express their identity and escape the urban alienation they encounter. The plight of the Shamate is another example of the power of social media in China and the ability of different consumer groups and “tribes” to carve out their identity via the internet.

Canned Fresh Air – guan zhuang yang qi -罐装氧气

It is no secret that alongside China’s rapid economic development, the country has experienced widespread environmental degradation and pollution. This degradation poses a serious threat to China’s growth and stability; costing the country roughly 9% of its gross national income, and causing between 350,000 and 500,000 people to die prematurely each year as a result of air pollution.

In order to minimise their exposure to these dangerous pollution levels, health-conscious Chinese consumers are resorting to extreme, and sometimes weird, strategies. The market for environmental health products is thriving–sales of air purifiers hit ¥3.5 billion ($560 million) in 2013, 80-100% more than 2012. Consumer demand for environmental products only looks set to continue growing.

One of the more unusual of these environmental products which recently hit international headlines is canned fresh air. In 2013 a Chinese millionaire, Chen Guangbiao, launched an initiative to sell cans of fresh air which is bottled in China’s countryside at 5 Yuan a pop (80c). With the proceeds going to charitable causes, the initiative was intended as a tongue-in-cheek reminder of the value of environmental protection and the priceless commodity that is clean, unpolluted air. The campaign proved a big hit amongst environmentally anxious Chinese consumers with a claimed 10 million cans sold in just 10 days.